Teal Jones: the monitor seeks a distribution to the interim lenders

Late in the afternoon of October 9, 2026, Competition Canada issued a "no action letter," and with it, the monitor reports, the remaining closing condition to both of the approved sales was satisfied: the share sale of the Surrey operations to Gillfor Manufacturing Inc. and the asset sale of the mill at Sumas, Washington. The monitor understands the transactions are targeted to close on October 30, and the cash-flow forecast filed with its report assumes the two buyers take over the operations immediately after, per the Thirty-Third Report of the Monitor, Oct. 16, 2026, paras. 96–97, 104(b).

The same day, Justice Weatherill extended the stay of proceedings to November 27 and approved the amendment to the interim lenders' support agreement attached to the monitor's October 8 supplement, per the Order Made After Application (Stay Extension), Oct. 9, 2026, paras. 3–4. That amendment, reported here on October 11, requires the sale or refinancing of all the remaining assets to be consummated by the earlier of the facility's termination date and October 30, per the Supplement to the Thirty-Second Report, Oct. 8, 2026, App. "A", "Agreement of the Parties", item (c).

On October 16 the monitor filed its Thirty-Third Report and, on the petitioners' behalf, an application returnable October 26 for two orders: one distributing the net sale proceeds and other cash to the interim lenders, and the net cash from the remaining non-SISP real estate to two term lenders; and one extending the stay to June 30, 2027, per the Notice of Application, Oct. 16, 2026, Part 1, paras. 1–2; Part 2, para. 66.

Thirty million dollars, before deductions

The application restates how the purchase prices under the two agreements are satisfied: $30 million of new cash contributions from Gillfor, and $90 million of financing arrangements between Gillfor and the petitioners' existing secured lenders, funded through a reduction of those lenders' existing financing facilities, per the Notice of Application, Oct. 16, 2026, Part 2, para. 65.

Of the $30 million, the monitor estimates that approximately $21 million would be left to distribute after three deductions: the anticipated purchase price adjustments under the two agreements, any amounts needed to pay out professional fees that might be subject to the Administration Charge, and a reserve the monitor will keep for the costs of administering the ongoing estate. The estimate assumes "the entire amount of the $5 million holdback is released back to the Monitor," per the Thirty-Third Report, Oct. 16, 2026, para. 113(a).

The holdback is the share purchase agreement's: the monitor holds back $5,000,000 of the price paid on closing while Gillfor and the monitor work out the final adjustment for inventory and receivables within 30 days after closing; anything owed to the buyer comes out of the holdback, and what remains is released to the seller, per the Redacted Share Purchase Agreement (Consolidated), ss. 2.7(b), (d). Both agreements also contemplate the usual adjustments for outstanding property taxes and utilities, in British Columbia for the Surrey facility and in Washington State for Sumas; those vendors and payables, the monitor understands, "will accordingly be unaffected," per the Thirty-Third Report, Oct. 16, 2026, para. 118.

Three further sources come after closing, two of them through the buyer. The agreement has the seller and the monitor use their best efforts to maximize the refund on the 2025 tax return and for any later period up to closing, including by carrying back non-capital losses; when the refund arrives, Gillfor pays the full amount to the monitor on behalf of ResidualCo, and keeps the benefit of the loss carryforwards for the years after closing, per the Redacted Share Purchase Agreement (Consolidated), s. 9.5(a). The cash from the 2025 refunds, the monitor says, "should not exceed $2.3 million"; the net cash Gillfor passes on from selling the remaining non-SISP real estate is unknown, and the monitor expects it to be less than $1 million in total. What the excluded assets will yield is "presently unknown," per the Thirty-Third Report, Oct. 16, 2026, para. 113(b)–(d).

Set against all of it is the interim facility. Approximately $58.4 million was outstanding on September 18, and the revised forecast, prepared by management with the monitor's assistance, projects $62.6 million by October 30, the targeted closing date, per the Thirty-Third Report, Oct. 16, 2026, paras. 99, 110. The proposed distribution "will enable the Monitor to make a partial repayment of the amounts owed to the Interim Lenders," per the Notice of Application, Oct. 16, 2026, Part 2, para. 67.

Who would be paid, and on what terms

The interim lenders are Wells Fargo Capital Finance Corporation Canada, Wells Fargo Capital Finance LLC and Export Development Canada, per the Notice of Application, Oct. 16, 2026, Part 2, para. 4(b). Their court-ordered charge, created by the amended and restated initial order of May 3, 2024 in the amount of $116,509,000 plus interest, fees, costs and other expenses, ranks, the monitor reports, subordinate only to the Administration Charge, per the Thirty-Third Report, Oct. 16, 2026, paras. 3–4, 109. The monitor proposes that they receive the net sale cash, the tax-refund cash and any cash recovered from the excluded assets, and that the real estate cash go to Royal Bank of Canada, as assignee from HSBC Bank Canada, and Business Development Bank of Canada, the term lenders, per the Thirty-Third Report, Oct. 16, 2026, paras. 112, 114.

On the term lenders' side, the monitor reports an opinion from its British Columbia counsel. MLT Aikins LLP reviewed their security over the non-SISP real estate and gave the opinion, "subject to the usual assumptions and qualifications," that each holds a valid and enforceable first-ranking charge against the non-SISP real property in British Columbia, the two ranking pari passu, per the Thirty-Third Report, Oct. 16, 2026, para. 112. The application calls the interim lenders, Royal Bank and BDC "the fulcrum secured creditors of the Petitioners," and says they support the distribution, per the Notice of Application, Oct. 16, 2026, Part 2, para. 69.

The draft order would have the distributions made "as soon as practicable," without further order, once the monitor has filed its certificates for both transactions. They would be made free and clear of all claims and encumbrances, the court-ordered charges included; would bind any trustee in bankruptcy or receiver later appointed; and would not be void or voidable, or deemed a preference, a transfer at undervalue or any other reviewable transaction. For s. 159 of the Income Tax Act and like provisions of other tax statutes, the monitor and the petitioners would act as a disbursing agent, not as a "legal representative," per the Notice of Application, Oct. 16, 2026, Sch. "B" (draft Distribution Order), paras. 2, 4, 6. The application rests the request on factors that, it says, Justice Gascon considered in AbitibiBowater, 2009 QCCS 6461: whether the payee's security is valid and enforceable; whether the distribution would result in significant interest savings, which it says paying down the facility will; and whether the estate is left with sufficient liquidity, which, it says, the petitioners appear to have under the facility and the cash held in reserve, per the Notice of Application, Oct. 16, 2026, Part 3, para. 4.